Correlation Between SoundHound and China Railway

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Can any of the company-specific risk be diversified away by investing in both SoundHound and China Railway at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SoundHound and China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SoundHound AI and China Railway Group, you can compare the effects of market volatilities on SoundHound and China Railway and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SoundHound with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoundHound and China Railway.

Diversification Opportunities for SoundHound and China Railway

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between SoundHound and China is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group and SoundHound is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SoundHound AI are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Group has no effect on the direction of SoundHound i.e., SoundHound and China Railway go up and down completely randomly.

Pair Corralation between SoundHound and China Railway

Given the investment horizon of 90 days SoundHound AI is expected to generate 5.34 times more return on investment than China Railway. However, SoundHound is 5.34 times more volatile than China Railway Group. It trades about 0.2 of its potential returns per unit of risk. China Railway Group is currently generating about -0.03 per unit of risk. If you would invest  539.00  in SoundHound AI on October 20, 2024 and sell it today you would earn a total of  825.00  from holding SoundHound AI or generate 153.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.41%
ValuesDaily Returns

SoundHound AI  vs.  China Railway Group

 Performance 
       Timeline  
SoundHound AI 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.
China Railway Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days China Railway Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SoundHound and China Railway Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SoundHound and China Railway

The main advantage of trading using opposite SoundHound and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoundHound position performs unexpectedly, China Railway can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Railway will offset losses from the drop in China Railway's long position.
The idea behind SoundHound AI and China Railway Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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